Indeed. Also, part of the problem Japan faced was an aging population that reached its stock purchasing peak. We are facing something similar on a larger scale. Unfortunately, I think this will apply to most stock markets over the next 15-20 years.
At the end of the day, people need evaluate results and weigh it versus other options. The grand concept known as "opportunity cost". I could try to shovel money into a 401(k) and strive for the mythical 8% a year and lose "only" 20-30% for 2008 OR I could take matters into my own hands. Either way, my returns need to be weighed against "8%" a year. This (8% figure) is what I was taught in my college finance class.
Also, some addition thoughts. In order to value invest you have to look at small/mid-cap stocks since these have the best chance of being mispriced (due in part to their low liquidity). However, just holding these kinds of securities presents new risks in a deflationary environment where default rates are higher among smaller companies.
No, we should buy a "Large well capitalized company" (quote taken from the Intelligent Investor) just like AIG...